Welcome to our March update on the Metro Vancouver housing market. The home sales are not catching up with new listings, but there is enough momentum to keep the prices in the upward direction for the month of March. In terms of number of sales, it was 31.2% below the 10-year seasonal average while total properties listed, it is 6.3% above the 10-year average. The Sales-to-active listings ratios are a measure of supply and demand. Generally anything above 20% is considered an indication for price appreciation. The ratios have not changed much from last month and the properties continue their price gains.
Currently the market is anticipating the Bank of Canada to lower their rate by 0.25% in their June meeting. This means for people with variable rate mortgages will see their rate drop by 0.25% but this doesn’t mean fixed mortgage rates will drop at the banks. Variable rates are tied to the Bank of Canada overnight rate while fixed mortgage rates are tied to bond yields. Bonds are traded daily based on the market’s anticipation of what the future rates will be. If you look at the chart below you see the step-like movements of the overnight rate. That is because the Bank of Canada lowers and raises rates in increments at a limited number of times during the year. The blue line represents the 5-year bond yield. That represents the cost of borrowing for the bank. And as a rough guide, you can estimate the 5 year fixed mortgage rate by adding 1.5% to this yield. You can see how much more it fluctuates.
This means if the rate expectations do not change, the 5 year fixed rate will not change. So don’t expect the fixed rate to change when the Bank of Canada lowers the rate in June.
Have a great month!
